A three-member arbitration panel ruled that Oglethorpe Power
Corp.'s power marketing contract with LG&E Energy Corp. and
LG&E Energy Marketing Inc. is valid and must be honored.
LG&E began its challenge to the contract in 1998. The company
said the decision will cause it to increase its fourth quarter
after-tax accrued loss on disposal of discontinued operations by
$175 million. The loss stems from increased load demands, higher
than anticipated future commodity prices and other factors. The
increase in the loss reserve will be recorded in discontinued
The ruling resolves an arbitration claim filed by LG&E and
its marketing subsidiary that sought to void their Oglethorpe
contract. The contract, which was executed in November 1996 and
went into effect in early 1997, provides for LG&E to supply
about one-half of Oglethorpe Power's total system load for up to 15
years, subject to early termination rights by Oglethorpe at five
years and by LG&E at 8 years. LG&E has continued to supply
power under the contract while the matter has been in arbitration.
Oglethorpe said the contract, the largest of its kind when it
went into effect in 1997, has yielded significant savings for the
cooperative and its member systems since its inception. Oglethorpe
Power is a power supply cooperative providing wholesale electricity
to 39 of Georgia's 42 customer-owned EMCs, which serve more than
2.9 million customers.
Joe Fisher, Houston
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